Rental Property Investing — Building Wealth Through Real Estate
The 1% Rule
A rental property should generate monthly rent of at least 1% of its purchase price. A $200,000 property should rent for $2,000/month. If it does, it is likely a good investment.
Cash Flow Calculation
Monthly rent: $2,000
Mortgage (20% down, 7%): -$1,064
Property tax: -$250
Insurance: -$100
Maintenance (10%): -$200
Vacancy (8%): -$160
Net cash flow: $226/month
Returns from Rental Property
Cash flow + appreciation + loan paydown + tax benefits. Total return often 12-20% annually when leveraged properly. But it requires active management or hiring a property manager (8-10% of rent).
Risks
Bad tenants, unexpected repairs, vacancy periods, market downturns, illiquidity. Real estate is not passive — it is a business.